Dow Under Dogs

The "Dow Underdogs" is an alternative to the the "Dogs of the Dow". It focuses on price appreciation rather than high dividend yield.

The idea is to buy blue chip stocks after they've been beaten down in price in the hope of reaping benefits during the price recovery.

The strategy is proposed by Charles B Carlson in his book "Winning with the Dow losers".

Investing Universe

As the Dogs of the Dow, the investing universe is that of the largest blue chips.
  • Investing Universe = Dow Jones Industrial Average
Indeed, since we're buying stocks that have been beaten down, focusing on blue chips provides a higher chance of stock price recovery.

Primary Theme Go back to Top

There is no primary theme.

Many simple mechanical stock picking strategies start with a reduced investing universe and simply use a ranking criterion. This is the case for the Dow UnderDogs.

You can check Stock Ratings for the utilization of a reduced investing universe.

Secondary Theme Go back to Top

There is no secondary theme.

Ranking Go back to Top

Carlson proposes 2 strategies:
  • Strategy 1: Rank by worse %price change over last 1 year
    This is the opposite of Momentum Investing. It shows that pricing of Blue Chips is more efficient than that of smaller caps and that one should buy ultra large caps before they start going up.


  • Strategy 2: Rank by lowest "Price/200 Day Moving Average"
    Buy the stocks whose price is the furthest down from its 200 Day Moving Average (This is a sign of recent Sell-Off). Carlson calls the ratio "Price/200 Day Moving Average" the Close Ratio.

Dow Under Dogs stock screens Go back to Top

Screening Theme %Price Change Close Ratio
Investing Universe Dow Jones DJIA Dow Jones DJIA
Primary Theme    
Secondary Theme(s)    
Ranking Low Relative Strength Low "Price/200 Day MA"
Number Of Holdings 10 10
Holding Period 1 year 1 year


Scanning through the performances tables at www.DowUnderDogs.com, we can see that:
  • Strategy 1 (%Price Change) with 10 stocks regularly beats the Dow. It adds about 1% extra returns albeit with higher volatility.


  • Strategy 2 (Close Ratio) with 10 stocks does not provide a clear advantage.


  • 5 stocks portfolio barely provides better returns than 10 stocks portfolio but does have higher volatility.

You might therefore just use the %Price Change variant with 10 Stocks.

The last point shows a lack of robustness of the strategy: a good ranking parameter provides better performances with fewer stocks so 5 stocks are supposed to beat 10 stocks.

Dow Under Dogs conclusion Go back to Top

Carlson's Dow Underdogs strategy does not provide a clear cut advantage compared to the Dow Jones Industrial Average Index or the Dogs of the Dow.

Netherveless, the strategy is still interesting since:
  • It has only 10 stocks
    Good for small portfolios


  • It has lower Dividend Yield than the Dogs of the Dow
    Could be good for Tax


  • Returns are slightly better than the Dow

You can get a list of Dow underdogs (%Price Change version) at the free mechanical investing stock screener.

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